21st Century Accounting Tutorials - Bank Accounts

What important concepts underlie bank statement reconciliation?

Keep these two points in mind as you reconcile statements with your 21st Century Accounting books:

We recommend that, if necessary, you make journal entries to reverse the effect of non-bank transactions on the General Ledger Bank Account, leaving the account "pure" — so that it reflects only the transactions that actually pass through the account at your bank. Transactions you entered in C21 that are not truly bank transactions — for example, journal entries involving 21st Century Accounting bank accounts that don't pass through your bank as deposits or withdrawals — will not, of course, appear on the statement from the bank. They WILL be displayed during 21st Century Accounting bank reconciliation and they will create discrepancies.

Bank Reconciliation involves two interacting phases:

Reconcile 21st Century Accounting Bank Account transactions to Bank Statement. In the Reconciliation window, mark all transactions that appear on your statement from the bank as "cleared" and enter all adjustments (such as bank fees and interest) that are on the statement but not entered into 21st Century Accounting yet. This phase is complete when the Statement Opening Balance plus Total cleared amount is equal to the Statement Ending Balance.

Reconcile Bank Balance to Book Balance. The balance in the account according to the bank and the general ledger bank account balance should be equal when the first phase is complete. Any discrepancy indicates that some transactions that will never pass through the bank have affected the general ledger bank account. You can press the Finish Later button, make journal entries to correct the G/L bank account, and return to complete the reconciliation.

What transactions (Deposits and Withdrawals) does the system display for reconciliation?

For reconciliation the system displays:

All unreconciled transactions up through the period of the Statement date.

Every unreconciled transaction involving any account that you have defined as a Bank Account in the Bank Accounts/Configure/Bank Accounts window.

In summary, the system displays unreconciled transactions (that is, transactions not yet "cleared" in the Reconciliation window) affecting the selected bank account whose transaction dates or posting periods fall in or before the posting period associated with the date you enter at Statement date. The Reconciliation window shows you journal entries, bank transfers, checks, deposits, custom journal entries, and transactions from anywhere else in the system you can specify a general ledger bank account. If the effect of a transaction is to increase the account balance, it is displayed as a Deposit. If the effect is to decrease the account balance, it is displayed as a Withdrawal.

How do I clear old transactions that show up in my first reconciliation? They are not on my current bank statement.

If you didn't use BPI Bank Reconciliation or if your BPI data was set up in certain ways, the data conversion may bring across a very large number of old bank transactions that show up as unreconciled for the bank account you select the first time you open the 21st Century Accounting Bank Accounts/Reconciliation window. For your first reconciliation, you may simply want to mark those old transactions as cleared. You can enter any Statement Opening Balance that is necessary to force the numbers to agree so that you can "Finish" (that is, "post") the reconciliation. Then, the next time you run Reconciliation, only current bank transactions will show up to be reconciled with your bank statement. For that reconciliation, you enter the correct Statement Opening Balance from the bank statement.

How do I resolve the discrepancy on the left side of the window?

On the left side of the Reconciliation window, you reconcile 21st Century Accounting bank account transactions to the bank statement.

In the Reconciliation window, mark all bank transactions that appear on your statement from the bank as "cleared" and enter all adjustments (such as bank fees and interest) that are on the statement but not entered into 21st Century Accounting yet. This phase is complete when the Statement Opening Balance plus Total cleared amount is equal to the Statement Ending Balance.

Discrepancies can be caused and resolved by problems listed here:

Debits and credits to the bank account appear in your 21st Century Accounting data but not on the bank statement.

To resolve —

Either press the Finish Later button, make journal entries to correct the G/L bank account, and return to complete the reconciliation, or adjust the Statement Opening Balance by the sum of the transactions that do not appear on the bank statement and mark them as cleared in the Reconciliation panels. Try to make sure all future transactions to the bank account will actually pass through the bank!

Debits and credits to the bank account appear on the statement but not yet in your 21st Century Accounting data.

To resolve —

Enter in the Reconciliation Adjustments panel all transactions that appear on the statement but not yet in the 21st Century Accounting system, such as bank charges, electronic transfers, and dividends.

How do I resolve the discrepancy on the right side of the window?

On the right side of the Reconciliation window, you reconcile bank balance to book balance.

The balance in the account according to the bank and the general ledger bank account balance should be equal when the first phase is complete. Any discrepancy indicates that some transactions that will never pass through the bank have affected the General Ledger bank account. You can press the Finish Later button, make journal entries to correct the G/L bank account, and return to complete the reconciliation.

Note that you can also complete the Reconciliation (click the "Finished" button) even when this discrepancy exists. You should adjust the General Ledger to remove this discrepancy (keep the bank account "pure") before the next reconciliation of this account.

What are "future postings?"

The system detects and displays any bank account transactions with a Transaction date before or in the period of the Statement date but with a posting period in the future. The net effect of any such transactions (minus withdrawals, plus deposits) is put into the Future postings field and subtracted, for the purpose of reconciliation only, from the Ending bank balance to give an Adjusted bank balance. This enables you to account for bank transactions entered into 21st Century Accounting that appear on your bank statement in a period before the posting period, when they will be reflected in the G/L account's period balance. You can consider these "future" transactions cleared on your bank statement and mark them as cleared in the Reconciliation window.

21st Century Accounting carries Future period postings forward until the Statement date is in the transaction's posting period. When you open the Reconciliation window to perform that reconciliation, the system clears the transaction from the future period postings field and adds it back into the Bank balance. The transaction is automatically reflected in the Book balance now, because the transaction has been posted to the bank account in this period.